As the government cracks down on Indian loan apps and blocked their services, it's high time to be on guard and find out what it means for borrowers. Read on to find more.
In a fresh crackdown, the Ministry of Electronics and Information Technology (MeitY) has blocked around 138 betting and 94 loan apps. The banned apps include Indian ‘Buy Now Pay Later’ (BNPL) apps, such as LazyPay and Kissht. MeitY has issued orders to block these apps following instructions from the Ministry of Home Affairs. Some of the apps banned have Chinese links.
According to a report by The Economic Times, the government considers the banned apps to contain materials “prejudicial” to India’s sovereignty and integrity. “Some of these apps were involved in predatory lending, which means they doled out quick funds to people in times of emergency on unfair and abusive terms and conditions. This eventually traps people in massive debt,” it cited senior officials speaking on condition of anonymity.
After the ban, LazyPay’s website was blocked, with the notice: “The website has been blocked as per the order of the Ministry of Electronics and Information Technology under the IT Act, 2000.” The company’s app has now stopped working.
Over the last few years, loan apps have come under the scanner of the government and law enforcement agencies. Last month the government informed Parliament that the RBI issued advisories to state governments to check unauthorised digital lending platforms and mobile apps through their law enforcement agencies.
Recently, Delhi police busted a multi-crore Chinese loan application fraud and extortion racket and arrested four people, including the mastermind behind the scam.
What It Means For Borrowers
Loan app scams are clearly on the rise in India. According to experts, through these apps, fraudsters typically target low-income groups or not-so-savvy financial people, wherein a smaller amount of money is lent. The modus operandi usually involves the deduction of processing fees from the loan, combined with penalties, and at significantly higher interest rates in cases of delay in payments. It can be substantial in comparison to an RBI-approved institution. Besides, it is alleged that these apps also get access to contacts and other information from the borrower’s mobile phone, which can be used to harass them.
Some of the due diligence that a borrower can do is check if the lender is approved by RBI or is associated with a financial institution, details of their website, the existence of physical office locations, Company Identification Number (CIN), and details of the Certificate of Registration (CoR) besides checking the terms and conditions of lending.
Legal Recourse
Once faced with such a situation, you could always take legal steps to protect yourself. The best way to protect yourself would be to remain aware and exercise caution.
First, you must never share personal details with anyone on social media or any random unknown person. You could always opt for simple techniques, such as refraining from clicking unknown web links, ensuring strong passwords, and changing passwords regularly. Senior citizens should also be aware that cybercrimes are punishable under the IT Act of India, and timely reporting is crucial.
According to experts, the option available to the borrowers is to lodge an FIR against such operators. "In most cases, the operators are not registered with the RBI as lenders and are therefore illegal. Moreover, the interest rates being charged are exorbitant and are therefore not recoverable in the usual course of things. However, to recover money from the operators, the consumers will have to pursue a long and arduous journey through civil or consumer courts. Through criminal proceedings, the operators may be brought to book, but the consumer may not necessarily be able to recover the proceeds," says Abhishek Tripathi, managing partner, Sarthak Advocates & Solicitors.
"RBI has also advised the borrowers to check if the platform which has lent is registered with the RBI, and if not, the same should be brought to the notice of the RBI," adds Tripathi.
"When such online frauds happen, the first and foremost point is to question the individuals getting duped. They should be reasonable and practical about such transactions and know what they are getting into. They need to be very cautious and alert. They cannot just give away their bank details and OTP to any random unknown person. Second, the moment it happens, they should report it to the cybercrime cell and file an FIR. If need be, they need to report a specific FIR against people involved in a fraud," says Abhishek Rastogi, partner, Khaitan and Co, a corporate law firm.